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Whether you’re flipping a single-family home or repositioning a multifamily asset, accurately estimating the After Repair Value (ARV) is one of the most critical parts of any successful real estate investment. The ARV influences your purchase price, renovation budget, financing, and ultimate profit—so when it’s wrong, everything else suffers.
Here are the 10 most common mistakes investors make when estimating ARV, and how to avoid them.
Comparables (or “comps”) are the backbone of any ARV calculation. But using sales data that’s too old or from different neighborhoods can mislead you. Stick to recent, nearby sales—ideally within the last 3 to 6 months and within a half-mile radius.
It’s not enough that a comp is nearby and recently sold. A 2-bedroom home isn’t a good comp for a 4-bedroom property. Consider square footage, layout, lot size, garage count, and even things like the presence of a pool or ADU.
While quality upgrades can boost value, some investors overestimate how much buyers will pay for custom finishes or luxury materials. Stick to improvements that match the neighborhood expectations—and don’t assume every dollar spent adds to the value.
Markets shift. If comps sold in a hot market and things have since cooled, your ARV needs to reflect that. Look at current listings, days on market, and price reductions to assess what buyers are actually willing to pay today.
High buyer demand and low inventory can push prices up—but if inventory rises during your project timeline, that could change. Factor in seasonal trends and local supply/demand dynamics when setting your ARV.
Your ARV needs to be realistic enough to withstand scrutiny by a third-party appraiser—especially if your exit strategy includes refinancing. Appraisers are conservative and often won’t match your aggressive projections.
Listings might be aspirational—but only closed sales tell the real story. Never base your ARV on what similar properties are listed for. Focus solely on actual sold data to keep your valuation grounded.
Many investors assume their finished product will be the top of the market. But unless your renovation truly sets a new standard, you’re likely to sell closer to the middle or upper-middle of the comp range, not the peak.
Even seasoned investors benefit from local insight. A knowledgeable agent who knows your submarket can point out nuances in buyer preferences, pricing trends, and renovation expectations you might miss.
Photos only tell part of the story. Whenever possible, visit your comps in person to see how they compare in curb appeal, finishes, layout, and condition. This real-world context can keep your ARV projections honest.
A good deal starts with a realistic ARV. Inflated numbers can lead to overpaying, underestimating rehab costs, and missing your profit targets. By avoiding these common mistakes and taking a disciplined approach to valuation, investors give themselves the best chance to succeed—not just at acquisition, but all the way through to a profitable exit.
TaliMar Financial is a private mortgage fund that offers investors the ability to participate in the growing market of private real estate debt. Since 2008, TaliMar Financial I has focused on providing real estate investors and operators with the capital they need to purchase, renovate, and operate residential and commercial properties. Our experienced executive team has funded over $450 million in short term debt secured on residential and commercial real estate primarily throughout Southern California and has returned over $40 million to investors in monthly distributions.
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